As a former Executive Director of the World Bank I know that the columnists of the Financial Times have more voice than what I ever had, and therefore they might need some checks-and-balances.
Currently, having probably trampled some delicate ego, I am a persona non grata at FT.
Would the child shouting out “the Emperor is naked” have his observation published in FT? Would the child now need a PhD for that?

For more see "A Blog is Born" at the very bottom.

February 26, 2007

Sir, while reading Wolfgang Munchau’s “The last thing Italy needs is the more of the same” February 26, I remembered that some years ago I heard someone say that solving all the problems of Venezuela was easy, it just requires turning all the Venezuelans into Swiss, but the problem with that was that it could be an irreversible and so it might not be worth the risk. In the same way, the true challenge of transforming Italy lies in that so many would also like it to remain just the same. By the way I have lately met some globalized Swiss that seem to be a different breed that the one normally thinks of and so it would seem that the irreversibility of the Swiss is somewhat exaggerated.

February 24, 2007

Sir, Mr Manuel Riesco when arguing “Chile’s experience belies claims of those who believe in superiority of private schools”, February 24 is rightly concerned with “the poorest remaining in the public schools which have deteriorated” but somehow he seems to imply this would be the fault of the private schools, which obviously it is not. As I have always believed that the education of your own children might turn out to be dangerously useless if your neighbor’s children are left behind, I have always been a supporter of public education. Nonetheless, public education can be given through private mechanisms such as the vouchers and so Mr Riesco’s concern should perhaps be why the poorest of Chile have not received a sufficient large voucher to be able to access a private school. And of course this does neither imply that the public schools cannot or should not be good too.

Sir, I can almost hear you ordering to publish Gillian Tett’s and Joanna Chung’s “Death and the salesmen” in the FT-Weekend, February 24, not so much because it concerns the somewhat “gruesome topic of death” but so as not to be unnecessarily identified as the messenger of bad news when reminding the pension and insurance markets of some of the more scary implications of the increased longevity of people. It is a great article and we are already waiting eagerly for Death and the salesmen 2, since some of the scariest characters have yet to appear, like for instance those who actuarially are not supposed to live so long, like the smokers and the obese.

Just you wait until these risk groups start arguing that “if they can’t have the cake they don’t want to pay for it too” and require they be excluded from the longevity groups that need to pay for the costs of it, and as this could really increase the average longevity of those expected to live long. In the UK, in annuities, we already find that smokers receive higher annuities than a non-smoker, which in financial terms seems to be right. That said there is a huge social problem in waiting from the increased tendency to tend to the individual need, and that is of course that the number of people left to do the sharing with, gets fewer and fewer, until there is only you.

Sir Robert Wright when reporting in “The wrong line from London to Caracas” February 24, about the quid-pro-quos that Ken Livingstone should be planning in appreciation of Hugo Chavez’s (not Venezuela’s) petrol gifts to London and that will allow to cut the transport costs for its poor (and rich?), he mentions that Transport for London, the transport authority, might help to provide Caracas with good traffic lights. Forget it! Traffic lights amounts to a too indecent mirrors-for-pearls gift in a country where the price of petrol is less than 3 cents of US dollars per liter and therefore the traffic is unstoppable, and also its President is running amok after and through any red light he sees.

Sir, Christopher Caldwell with his “On parenthood and perplexity”, February 24, leaves us perplexed about the need of the late Anna Nicole Smith to serve as an excuse to discuss some of the most fundamental issues of our time, or perhaps that’s just the way it goes, the more important the issue the sillier the excuse needed.

That said let me compliment and complement the article by slipping by two comments that might help to keep us perplexed and attentive. First since the issue of genetic testing to “determine whether you have a pre-existing medical condition” was briefly touched upon, on passé, and these tests risk to exclude anyone of us from the pool of normal insurable and shared risks, leaving us out in the cold, what now any individual, and indeed the whole society most need, is an insurance against whatever could be discovered in those tests. Second, and as any honest right-to-life conviction cannot go hand in hand with any further-delay-of-life action there are some groups pushing for the adoption of frozen-embryos, which could then lead us into a discussion of primary, secondary, and perhaps even of intellectual fathers.

February 23, 2007

Sir, I might not like it too much if a vulture-fund-manager invited any of my daughters out to celebrate a killing in Zambia debt but, having said that, neither am I so sure that the world would be a better place without the vulture funds.

That some can find opportunities in buying uncollectible loans and squeeze fortunes out of them when others have decided to clean up their books, is just part of the circle of life, and part of the same market mechanism which signals how much, or how little, the loans are worth, since the price of a loan indicates the expectations of collecting on the loan and not the expectations of collecting on a “pardoned” loan. Yes, the vulture funds are into an ugly business, cleaning up among corpses, but, by their sheer presence, they might perhaps even help to reduce the number of corpses.

Most, or perhaps all of the scholar papers on the restructuring of sovereign debt, state as the explicit purpose of the whole exercise, that of enabling the countries to regain access to the international capital markets again (something like the torturer waking up his fainted victim) and so, if you really need to pick on one, you might also choose to do so at that moment in the circle when the new born debt-overhang-ridden countries gets thrown out to start defending itself again from the many dogs-of-finance out there.

There is so much written about freeing up the countries in order for them to access the markets while comparatively so little about how they should go about to avoid repeating the same mistakes that perhaps I should even frown when it is a regular investment banker who knocks on my door and asks for my daughter. I mean what is some hundred of percents on some few millions when compared to some basis point on a couple of billions.

February 21, 2007

Sir, in your editorial comment “Unconventional oil”, February 22, you express some doubts about the quality of oil produced from shale and sands. Don’t worry, at the end of the day smell it and you will not be able to differentiate it from any petrol produced by the sweetest light Saudi crude. That the crude itself is of a lower quality is just a cost factor, and thankfully not at all like as if the grapes had gone bad.

And even in terms of its final price, in Europe at least, there would be more than ample space to sell this new-same-old petrol at its current prices, but of course then the taxman would have to reduce some of his enormous current take.

In fact from another perspective it is even a better quality crude…it generates more jobs and less curse for the producer.

Sir, Tom Burgis in “Chávez agrees fuel deal for London poor”, February 21, quotes London’s Mayor Ken Livingstone referring to it as “the work Hugo Chávez is doing around the world in tackling the problem of poverty”. Has your major gone nut? The way he goes about it next time he might even come up with that his superhero Hugo Chávez will also tackle the environmental problems of the world, ignoring such facts that eight years into Chavez’s peculiar to say the least socialist government, the petrol is sold in Venezuela at 3 US dollar cents per liter, transferring thereby around 10% of its GDP from the poorest of the poor to those who drive cars, damaging the environment and making it almost a mission impossible for your aspiring world-traffic-problem-tackling-mayor to allow his transport Chief Peter Hendy to find a solution for the traffic jams of Caracas.

We also read that Mr Livingstone will “actively and efficiently promote Venezuela’s image in the UK” and I cannot resist speculating on what Chávez would have said if, in Caracas, one of its majors had signed a similar deal to promote the image of for instance the USA.

February 17, 2007

Sir, while we wholeheartedly agree with your support of “The private role in educating the poorest” February 17, we cannot but observe that perhaps everyone could benefit from having the incentives of the educators somewhat better aligned to the final results for the students. This could perhaps be achieved by having the educators, instead of collecting all their dues cash, upfront, receiving participation in the future earnings of those who they supposedly educate to be able to earn.

This idea of “Human Capital Contracts, that as far as we know was first advanced by Milton Friedman in 1954, is indeed a real education revolution waiting to happen, and a small company called Lumni is showing us the way having already managed to finance the education of some students in Chile and Colombia against a modest percentage of their future earnings, for some months or years.

You also mention the role that building brands could have in education by motivating the quest for quality, but there we should hope that those brands are not purely the result of advertising budgets and that the promises of those brands are backed up with the investment of some real money of their own. Ideally the “Human Capital Contracts” should be standardize in such a way as to permit their securitization, and thereby mobilize the resources that are much needed. Investing in the future earnings of our youth sounds more than reasonable, perhaps even for the professors’ retirement fund, that is of course if the professors really can deliver on their promises.

Following this route, will also diminish the risk of seeing someone suing their Alma Mater for failing in delivering its services.

Sir, if the average life length of a person in UK were 80 and our democracies had anything to do with representation of interests, as in companies, then a new born should have 80 votes, a middle age 56 year old like me 24 votes and someone over eighty should count his blessings if he is allowed to keep his single vote. Of course the previous is clearly just an exaggeration, but it serves to argue in favor of the one-child-one-vote concept, in which the votes of the children are to be exercised by their mother, father or older siblings.

I say this loudly protesting the title of grownup Christopher Caldwell’s “Why the ‛right of the children’ is a juvenile concept”, February 17 and some of it contents, among it his authoritarian conclusion that “Rights over to children will either belong to parents or to the state”.

Sir, with many of our current problems such as the climate change begging for longer perspectives than next quarter’s results, is it not high time that the children, who are the ones who could really have to live in the heat, should have their interests better represented in our societies? Also, the democracies that are now turning into baby-boomer dictatorships, it could truly behoove them to allow their young to have more say, before they all in frustration decide to carry out a coup and thereafter, hopefully politely, show their elders the way to the nearest “ättestupa”, those cliffs from were supposedly the Vikings threw themselves when they became burdens to the society.

February 08, 2007

Sir, Kenneth Rogoff illustrates his “No grand plans, but the financial system needs fixing” with some quite hair-raising examples of some unattended possibly explosive financial bombs and he discreetly hint that this has something to do with some smugness in the developing community. I am not really sure that is the problem. If a company makes a mistake it pays dearly for it, sometimes with bankruptcy but, when the developing community goes wrong, their members are usually not affected and they just keep hanging around, incapable of thinking out of their old box, standing in the way of whatever must be done…until it is too late.

The recent and so painfully bungled efforts with capital controls in Thailand is a perfect example of what I mean. Although the IMF has after decades of predicating open capital markets with no levees for many years now realized that the small economies might in fact be too exposed to the financial tsunamis the global oceans can create, it has yet been incapable to workout anything like a “capital control for dummies”, which could have been quite handy for Thailand. Of course, just in case, I am not thereby implying that those in Thailand are “dummies”, but only that they should have been better helped by those who present themselves as “experts”.

And let us not forget how the financial regulators, by arrogantly deciding they could eliminate risks from the banks, have just driven the risks underground, where these are now waiting to explode. Although they created the bombs, do they now have the humility required so as to be helpful in disarming them? I am not so sure.

February 07, 2007

Sir, Martin Wolf, “In spite of economic skeptics, it is worth reducing climate risk”, February 7, is absolutely right saying that we should view our current investments to reduce climate risks as an insurance, I guess similar to those that you are the happiest with when they turn out to be lousy investments… like who loves to collect on a sickness insurance?

Having said that when Wolf mentions that some have criticized The Stern Review for ignoring the “possibility that richer future generations will also be able to adapt quite well to climate change” he should perhaps have made it more clearer that we might in fact be that future richer generation that is trying to adapt, while there is still time.

One thing that Wolf does not point out sufficiently, and that might also be the biggest cause for our inactions, is the growing divergence between the seriousness of the environmental problems described and the frequently silly nature of the solutions prescribed. Today even if we know ourselves to be in a big bad very ugly hole, we still have very few sensible ideas of how to stop digging.

Sir looking at the high tuition fees of many business schools one wonders if they are not setting themselves up to be sued by their graduates for failure in delivering what they promised as indeed the current incentive structure seems a bit misaligned with students investing their futures and paying for it and schools only collecting present values.

Lately there has been some talking about Income Contingent Loans as a way out for the students that get trapped between high education debts and unrealized earning hopes. The problem with these ICL is that they are mostly based on some government subsidies while it might be time for schools to really make education their business and share the risks by investing part of their fees in participations of their students’ future earnings.

Business schools might argue that they need all their money now to pay for their huge costs but, honestly, if they cannot manage to securitize those participation contracts and sell them to the financial markets when everything else seems to become securitized then they should perhaps not be allowed to call themselves business schools either.

The first who to our knowledge broadly advanced this idea was Milton Friedman in 1955 and lately Miguel Palacios of the University of California has also been writing extensively about what is called Human Capital Contracts. Their splendid ideas have yet not taken hold much, perhaps because the education providers themselves have lacked the incentives, but this might change rapidly, after the first suit.

February 04, 2007

Sir, if an illness can be cured by a little pill, that will somehow take away from its perceived seriousness and something similar could be happening with the endangered environment when the sense of urgency we get from the scientists, is thereafter diluted by the wide array of solutions offered, of which many seem quite simplistic and others do seem more like commercial propositions… The world as you know it will end… unless you buy yourself a hybrid car!?

We agree fully with your “We need a clear and predictable worldwide price for carbon”, February 3, in that the way forward must include a compensation for the costs that developing countries cannot afford, but having said that we get an uneasy feeling about the suggested source of revenues, the trading of rights to emit, as societies do better if they use the markets to trade good-goods and services and not bad behaviors. Similarly developing countries, by just being poor, might be doing less damage, not necessarily, and they might have some overriding urgent needs but, to state “overriding development objectives” as an excuse for inaction of them is wrong, as it implies that either they are to be developing for life on another planet or that they are not suppose to share into the responsibilities of this one.

Finally, what does “the most efficient possible use of energy resources” mean? Before we have a real unbiased source of good solutions that make real sense, even though some of them will most likely hurt a lot, many will find it hard to believe there is a real emergency, and perhaps leading us all to cry “wolf” once too many.

Sir, in your editorial “Where is all the risk”, February 3, on how financial innovations sometimes come hand in hand with diminishing transparency, you rightly conclude that “the best solution is to make sure that increased complexity is matched by increased flows of information”, though you forget the most important requirement of it, namely that the information needs to be understandable and digestible. As is we both know well that many directors of the boards of the big banks, if not all, and most of its management do not understand the information that is already flowing…does anyone?

Also, if we are going to have a chance to counter whatever the dangerous financial minefields might have in store for us, let us not only blame the “complexities” but also the arrogance implicit in ideas such as those coming from Basel about being able to drive the financial risks out from the banks, through regulations, without causing these risks to go underground, build up pressure and explode much worse. Also, as each bank risk avoided might just as well be an opportunity lost, we still have much adding to do before we get close to figure out the total cost of the whole Basel exercise. Sir, although we might indeed frequently need the help of experts, sometimes we should also beware of some of them.

Me and my constituency!

Me and my constituency!

FT, just so that you know:

Some very few regulators thinking they were capable of managing the bank risks of the world, caused and are still causing immense sufferings, and you Sir are refusing to help holding them accountable for that.

My wicked question to FT

When do banks most need capital, when the risky turn out risky, or when the "not-risky" turn out risky? --- Yep, I think so too!

Videos: The Financial Crisis

My credentials

I have more credentials than most to speak out on the financial crisis and the subprime financial regulations having spoken out loudly about that since 1997...which could be embarrassing to “experts” with weak egos.

Most of those who think of themselves so broadminded when asking for “out of the box thinking” are so very narrow-minded they can only accept what comes, if that outside box lies “within their own small networks”.

Thank you, Martin Wolf

And on July 12 2012 Wolf also wrote that when "setting bank equity requirements, it is essential to recognise that so-called “risk-weighted” assets can and will be gamed by both banks and regulators. As Per Kurowski, a former executive director of the World Bank, reminds me regularly, crises occur when what was thought to be low risk turns out to be very high risk."

And that is something that I of course also appreciate, but that yet makes me curious on why Wolf does not follow up on it.

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I don’t take comments here because I might not have the time to answer (or censor) them and I hate unanswered comments, but, if you want me to comment on something somewhere else invite me and I might show up: perkurowski@gmail.com

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Off-the-blog

One great perk I get from maintaining a blog like this is that it allows me to sustain many conversations with some great journalists who also need and wish to be kept “off-the-record” or as I call it “off-the-blog”.

Yet one wonders

Between January 2003 and September 2006, out of 138 letters to the editor that I sent to the Financial Times before I placed them on this blog they published these 15. Not bad! Thank you FT!

Unfortunately, since then and until the very last day of the decade, out of some 1.000 letters that you can find here, FT published none, zero, zilch. Of course FT is under no obligation whatsoever to publish any of my letters and of course one should not exclude the possibilities that my letters might have quite dramatically gone from bad to worse… yet one wonders.

My usual suspects are:

1. Someone in FT with a delicate ego feels his or her importance diminished by giving voice to a lowly non PhD from a developing country daring to opine on many issues of developed countries.

2. That FT has some sort of conflict of interest with the credit rating agencies that makes it hard for them to give too much relevance to someone who considers they have been given too much powers.

3. The FT establishment had perhaps decided there were only macro economic problems and not any financial regulation problems, and wanted to hear no monothematic contradictions on that.

4. That FT feels slightly embarrassed when someone repeatedly asks the emperor-is-naked type question of what is the purpose of the banks and realizing this was something FT should have itself asked a long time ago.

5. It is way too much oversight for FT to handle.

6. Or am I just supposed to be a living example of one half of the Financial Times motto, namely that of "without favour"Which one do you believe is closest to the truth?

A Blog is born

I like reading The Financial Times, or FT as it is known, and I frequently write letters to the editor and some of them that have indeed been kindly published, for which I feel thankful. But then I realized that all those letters to the editor that for reasons impossible for me to comprehend were never published, were condemned to an eternal silence not of their own fault, and so I decided to, at a marginal cost of zero, to resurrect them and keep them alive, right here.

English is not my mother language so bear with me and you’ll probably note when my letter has been published in FT by its correctness. Swedish is my mother language but I have not written anything serious in it for about 40 years and last time I tried, they just laughed their hearts out because of my démodés. Polish is my father language but, unfortunately, I do not speak a word of Polish, much less write it. Yes Spanish is my language, as I am from Venezuela and although I trust I write in it with great flair, I would still never dream of publishing an article in Spanish without having it edited by my wife.

And so friends here is my Tea with FT blog with my old and new letters to the editor. I hope you will share them with me now and again, and then again and again.

Welcome, and cheers, as I believe they say over there.

Per

PS. Just so that FT does not get too cocky and believe it is my only window to the world, I will now and again publish a letter sent to the editor of another publication.